Late Pullback Quashes Snapback Try as Indices Extend Decline to a 7th Session

By Harry Boxer, The Technical Trader

The stock market indices had a nasty day today, and despite a late 3-wave rally attempt, which took back part of the losses, a last 20-minute pullback closed them solidly in the red.

The day started out with a gap down on the Nasdaq 100, but a surge higher on the S&P 500, as the futures were diverging in different directions. But pressure from the NDX eventually pulled the Dow and SPX down, and a steep morning slide ensued. They reached their lows by late morning, bounced, then started their afternoon rally, which was pretty much a 3-wave corrective looking affair.

Important overhead resistance was not taken out as the indices then failed to follow-through and rolled over late in the session.

Net on the day the Dow was down 115.70 to 10120.46, the S&P 500 down nearly 13 at 1084.57, and the Nasdaq 100 down 47.80 at 1717.10, a loss of 2 1/2 percent. The Philadelphia Semiconductor Index (SOXX) fell 10.20 to 327, a more than 3 percent loss, pressuring Nasdaq today.

The indices are now close to a 7% pullback over the last 7 sessions.

Advance-declines were nearly 3 to 1 negative on New York and 2 1/2 to 1 negative on Nasdaq. Up/down volume was 7 to 3 negative on New York on total volume of 1.1 billion. Nasdaq traded a heavy 2.8 billion and had a very negative 4 1/2 to 1 volume ratio.

TheTechTrader.com board was mixed but mostly lower. The single-levered UltraPro Short S&P 500 ProShares (SPXU) jumped 1.32 to 38.88, the Direxion Large Cap Bear 3X Shares (BGZ) 62 cents to 18.26, the Direxion Small Cap 3x Bear (TZA) 51 cents to 10.42, and the Direxion Financial Bear 3x Shares (FAZ) 33 cents to 19.51.

China Agritech (CAGC) snapped back 1.43 to 29.23, the only point-plus gainer among the regular, non-ETF issues on our board.

Among the fractional gainers, Origin Agritech (SEED) 56 cents to 11.08, Netlist (NLST) 20 cents to 3.99, Incyte Pharmaceuticals (INCY) 31 cents to 10.37, and Brigham Exploration (BEXP) 45 cents to 13.43.

Stepping back and reviewing the hourly chart patterns, early on the indices broke key short-term support, which held the last 3 sessions, both on the NDX and SPX, then dropped fairly sharply mid morning, and then rallied back in a corrective-looking move, only to rollover again into the close.

Not a pretty way to close today, certainly genuinely bearish-looking patterns & down channels continue to develop. The indices were oversold before today, nearly extremely so, and with today’s very negative technicals are at quite extreme oversold levels here, enough to generate a snapback rally over the next day or two, which we are expecting.

Good trading!

Harry